Market Recon Tuesday

Good Morning,
                        Stock ownership, according to Gallup, is now down to 52% among Americans… it’s lowest level in a couple of decades.  Every day, we seem to hear about money coming out of funds for weeks on end, or big name investors, save for Mr. Buffett cashing out of big name stocks.  I’m not going to tell you to go crazy, but when there’s a consensus on market direction, that doesn’t always mean that “they” are correct.  In my experience, if something you already thought you liked, goes on sale… well… that may be when to get your feet wet.  If you’ve been eyeing some expensive gadget, or home appliance, or whatever, and then you see it somewhere for what you perceive to be a cheap price, you jump, right ?  Why is it different for equity ?
                        Yes, expectations for monetary policy have perverted the marketplace, not just for stocks, but for bonds, commodities, and currency valuations as well.  There is a but coming.  But, one must attempt to excel in the environment provided.  Were the big oil names cheap when they went on sale a few months back ?  Obviously.  Were the big tech names cheap when they went on sale ?  The jury is still out there, but you haven’t lost money yet.  Are the retailers cheap now that they’ve gone on sale ?  That’s the question that I myself am wrestling with.  Without a doubt, somebody has been undervalued in this space.  Bottom fishing is good sport.  Stay within your tolerance for pain, do the homework (without making the homework part of the passion, you will fail), and trust your instinct.  There is almost nothing more rewarding than being right when you think for yourself.  Oh, when you’re wrong there’s some anguish, but that’s why you play by rules.
                         Water, change of socks, wet weather gear.  Ok, gang… let’s do Tuesday.
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Macro & Friends
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08:30 ET
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CPI (April):  Depending on who you follow, the headline print for April CPI is expected to come in at m/m growth of either 0.3%, or 0.4%.  Thanks to the rebound in Crude prices, this will be the hottest headline print since last July.  The more heavily focused upon Core (less food & energy) print is projected for a m/m increase of 0.2%.  That would be in line with what we’ve seen for at least a year now.  The year over year Core print, which is the one that has everyone talking, is expected to remain flat at 2.2%.  This will be the sixth consecutive month that Core CPI has been at, or above the Fed’s stated 2% target.  Now you know why they focus on the PCE.  More flexibility.  One side note….  Apparel has been an inflation weakling for a while, but if you want to peruse last Friday’s April Retail Sales release, you’ll see that there was a turnaround for apparel.  I would love to see if it translates in terms of price here.
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Housing Starts & Permits (April):  Existing Housing Starts took one in the gut in March, missing consensus after a fairly even four month run.  We do think that likely there will be some kind of rebound for April.  Let’s look for numbers like 1.128M (SAAR) for Starts, and an even 1.13M (SAAR) for Permits.  The range for both runs with a slight skew to the upside of expectations.  Between these two, and this Friday’s Existing Home Sales number, we should get an idea of where things stand at this time as far as the housing market is concerned.  For newcomers, SAAR = Seasonally Adjusted Annualized Rate.
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08:55 ET
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Redbook (Weekly):  Redbook chains store sales ran hot last week.  I’m seeing differing numbers as to what exactly they were, but even the lowest among them was for a strong year over year number.  Keep this one above 0.5% when measured in this way, and it remains out of sight, and under the radar.
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09:15 ET
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Industrial Production (April):  Just so you understand what we’re looking at here, US Industrial Production has actually contracted in 12 of the last 16 months.  Consensus view for today, is for growth of 0.3% m/m, which would be a big deal.  If this figure holds, this would be the third best month since this awful stretch began.  As the manufacturing sector had a less awful April than what we have seen for a bit, for this item to print below the flat-line would be a huge disappointment.  Huge.
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Capacity Utilization (April):  For March, this item printed at an incredibly poor 74.8%, which was it’s worst level since 2010.  So obviously closely tied to production, the hope here is that with a small bounce in the one…. comes a small bounce in the other.  The pros are looking for something like 75.0% for April in this space.  These are high profile data-points, but still I find it likely that they’ll be overshadowed by the inflation, and housing data.
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12:25 ET
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Fed Speakers:  San Francisco Fed Pres. John Williams, and Atlanta Fed Pres. Dennis “the Spider” Lockhart are both scheduled to participate in the same clambake today.  That happens to be the Politico event in Washington, DC.  Both of these speakers have been out there in recent weeks leaning hawkish, or in the case of Williams, just plain hawkish… for now.  Neither one of these guys votes this year.
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13:15 ET
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Fed Speaker:  Dallas Fed Pres. Robert Kaplan will speak from Midland, Texas.  Kaplan is not a voting member of the FOMC this year.  He, as every other speaker who has been out there fro a couple of weeks now, has been supportive of an interest rate increase in the near future.  There will be Q&A today, after the speech.
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Tuesday’s Earnings Highlights
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Before the Open: HD (1.34), TJX (.71)
After the Close: Nothing spectacular